Regulation Uber Alles

Roger Partridge
The National Business Review
18 November, 2016

“Regulation above all else” is exactly what ridesharing wunderkind Uber must feel as it faces up to select committee hearings in Wellington this month.

Despite promises of a new regulatory framework that recognises the role of global technology in improving safety and consumer protection, the bureaucrats at the Ministry of Transport have fallen well short. Their innocuously named Land Transport Amendment Bill threatens not just Uber’s low cost model, but its ability to evolve to meet some of New Zealand’s most urgent transport needs. It is less gig economy than bureaucratic monstrosity.

Why throttle Uber you might ask?

That is a fair question. Since launching its app in New Zealand in 2014, Uber has revolutionized small vehicle passenger services. After a little over two years, 190,000 New Zealanders now actively ride with Uber across the country. They are supported by up to 3,000 local drivers, who partner with Uber to provide rides through the Uber app.

The success of Uber in New Zealand mirrors its success internationally. Indeed, so successful has it been, it has spawned its own, self-titled verb.
For those readers who are yet “to Uber”, there are good reasons why it is so popular.

For passengers, the model has proved safe, reliable and affordable. Using an app on their smartphones, passengers can request a pick-up, see the name and licence plate of a prospective driver, view how highly other passengers have rated the driver (and take comfort from Uber having pre-vetted all drivers using its platform), monitor via GPS the location of the vehicle, preload the destination into the app, receive details of the fare in advance, and pay cashlessly via a preloaded credit card.

The model is attractive for drivers too. In this country, most Uber drivers are ordinary New Zealanders looking to earn an income from their idle cars. They are parents, students, retirees, shift-workers and even those living with disabilities. About half of them drive for less than 10 hours a week. And they have complete control over when, where, how often and for how long they drive.

And Uber’s role in all this? Well, it neither hires the drivers nor provides the transport. Instead, it provides the technology platform which both prospective drivers and prospective passengers use to arrange rides. It sets the rules of the game, but it is not one of the players.

That brings us to the Bill. When introducing it in Parliament, Minister of Transport, Hon Simon Bridges claimed it would modernize the regulation of small passenger services and accommodate new business models.

It will do no such thing. It is a product of an analogue age when the action has moved online.

What is wrong with the Bill? Well, so much that it is hard to know where to start. But you can get a sense of the Bill’s failure to grapple with the new economy from three examples.

The first is the way it treats platform providers like Uber. The Bill starts well, drawing a distinction between “operating” a transport service and “facilitating” one. As you might expect, Uber is a facilitator, not an operator. But that is where commonsense ends. The Bill then proceeds to treat facilitators as operators, requiring a facilitator like Uber to present vehicles for inspection, to collect accommodation and fuel records, and to collect work-time logbooks from drivers on a “regular basis” (more on logbooks shortly).

It matters not that Uber provides a software platform and does not operate a transport service. It is expected to come down to New Zealand from San Francisco and deliver its drivers’ vehicles and records to the New Zealand Transport Agency for inspection.

It gets worse. Because a facilitator is treated as an operator, it must also comply with the Bill’s residency requirements. These require that a person with control over the facilitation service lives in New Zealand. Yet the Uber app is owned, developed and operated from the United States. And despite the outcome of the US Presidential election, we can hardly expect Uber’s CEO and board to move to New Zealand as a condition to providing the Uber service here. They are also needed elsewhere.

The second example is the requirement for logbooks. Despite Uber being an online platform, with each journey and its GPS coordinates logged by the Uber app, the Bill will require all drivers to carry and maintain physical logbooks, just as traditional taxi-drivers must do.

Quite apart from the obvious redundancy of this requirement for platforms such as Uber, it also ignores the realities of the Uber’s model. Logbooks might be justified in the historical context of full-time drivers. But ordinary people using their personal cars with the Uber app may log-on for a few hours here-or-there around other activities. A logbook will provide no help with measuring their fatigue.

The third example is even worse. These are the Bill’s regulations of carpooling. They will stifle innovations like uberPOOL, a facilitated carpooling initiative that is reducing congestion in many other cities around the world. The Bill does not touch drivers who carpool to recover the cost of fuel, but impose costly red tape on carpooling that involves even the slightest profit.

All these problems matter. Complicated and, in many instances, unnecessary regulations impose cost on both drivers and passengers alike.

Adding complexity and cost for prospective drivers will hinder or prevent ordinary New Zealanders from accessing the flexible earning opportunities that platforms like Uber provide. It will steer ridesharing towards full-time drivers. And this will come not just at the cost of those wanting t to supplement their incomes by part-time participation in the Uber platform, but will increase the cost and reduce the availability of the Uber service. A pool of full time drivers cannot provide a service that is as demand-responsive, efficient and affordable as Uber’s customers currently enjoy.

What should the select committee do? The answer to this is easy. It should do what the Minister should have done when his officials served up the Bill: send it back.

Instead of prescriptive regulations for a bygone era, the new economy needs a regulatory model that is flexible, efficient, and outcomes based. Legislation that incentivises innovation, rather than stifles it.

There is an opportunity here for New Zealand’s regulatory regime to embrace the digital economy and set the standard internationally with a permissive accreditation and licensing regime.

Unfortunately, old habits die hard. So far, our bureaucrats have failed to live up to the challenge. The select committee should ask them to try again. Both Uber and its 193,000 New Zealand customers and drivers deserve better.


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